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Initial Coin Offerings Horrify a Former S.E.C. Regulator

nytimes.com

21–30 of 194 posts

Re: Initial Coin Offerings Horrify a Former S.E.C. Regulator

#21
post #2

They horrify me too. Some are plain fraud. Investors will lose, scammers will profit and/or go to jail. Some are promising startups, that will raise far more money than is healthy for their stage, and will die from too much money. If you don't have enough money (true for nearly everyone) it might be hard to imagine, but I've seen it when VCs give a startup too much. It makes them grow before they've found product-mar…

The key difference is that the companies raising money via ICOs are co-ops, not startups.

The reason startups go bankrupt when they have too much money though is because they're forced to spend money before they have product-market fit. And in the same way that the value created by good software scales exponentially as more dollars are invested, the costs of bad software scale exponentially as more dollars are invested.

Whereas money raised by co-ops is more akin to having money in your personal bank account, and it's not often that individuals go bankrupt as the direct result of having too much money. Sometimes they do, like with lottery winners, and I suspect we'll see that a bunch in the short term. But once we have better rules and norms, I think it's going to be less often that we see excess money killing co-ops.

Re: Initial Coin Offerings Horrify a Former S.E.C. Regulator

#22
>I.C.O.s represent the most pervasive, open and notorious violation of federal securities laws since the Code of Hammurabi

Can someone explain this statement to me? Is he saying I.C.O.s are the most flagrant violations occurring since the Code of Hammurabi was written, or is the Code of Hammurabi itself a violation?

Re: Initial Coin Offerings Horrify a Former S.E.C. Regulator

#23

The interesting unasked question here is why he seems to like FileCoin (the reference to decentralised storage markets) - what does he think that FileCoin gets right that others are getting wrong?

> what does he think that FileCoin gets right that others are getting wrong?

FileCoin retained a reputable law firm [1], restricted their applicable marketing to accredited investors [2] and used a template agreement designed by lawyers to comply with the law [3].

[1] https://www.nytimes.com/2017/08/07/business/dealbook/initial...

[2] https://techcrunch.com/2017/08/10/filecoins-ico-opens-today-...

[3] https://saftproject.com

Disclaimer: I am not a lawyer. This is not legal nor securities advice.

Re: Initial Coin Offerings Horrify a Former S.E.C. Regulator

#24
post #17

I am horrified by what was/is allowed legally at wall street. Not that ICO's are any better.

Wallstreet has a monopoly on IPOs, they are clearly threatened by the ICO boom. Its just the internet all over again. Candlemakers wanted to ban light bulbs. Newspaper wanted to regulate online media. They all failed. So will wallstreet. Its just a matter of time, the forcing function is way to strong.

What is "wallstreet"?

Re: Initial Coin Offerings Horrify a Former S.E.C. Regulator

#25

I am horrified by what was/is allowed legally at wall street. Not that ICO's are any better.

What is allowed that horrifies you?

One that bothers me the most is automated high frequency trading. They can cause the entire market to crash because of one mistake.

Re: Initial Coin Offerings Horrify a Former S.E.C. Regulator

#26

How would you differentiate fraud from a legit ICO? What makes a ICO not fraudulent? It's hard to determine

It's a subjective judgement, and not really useful. Some more useful questions are: which are illegal, and which will fail? The answer to both of these questions is "almost all of them".

Even so, it might take a long time before they start failing in large numbers and law enforcement starts taking action. Until then, a lot of money will be won and lost.

Re: Initial Coin Offerings Horrify a Former S.E.C. Regulator

#27
post #20

Earlier quoted context omitted.

The same can be said for a lot of investments, there's nothing about ICOs that makes this unique aside from the fact that most people don't understand computers.

Except we have entire sets of laws and systems to try to control and expose the risk of other investments. ICOs are the Wild West, with the added benefit that they’re totally intangible so you can’t even be stuck holding the bag.

[deleted]

Re: Initial Coin Offerings Horrify a Former S.E.C. Regulator

#28

How would you differentiate fraud from a legit ICO? What makes a ICO not fraudulent? It's hard to determine

The same can be said for a lot of investments, there's nothing about ICOs that makes this unique aside from the fact that most people don't understand computers.

Well, the obvious difference (IMO) appears in the article:

> Coin offerings generally happen without the involvement of financial institutions or regulators because investors pay for the coins using Bitcoin and other virtual currencies, which can be sent outside the traditional financial system.

Essentially it's a throwback to the days before any financial regulation existed.

Re: Initial Coin Offerings Horrify a Former S.E.C. Regulator

#29
post #20

Earlier quoted context omitted.

The same can be said for a lot of investments, there's nothing about ICOs that makes this unique aside from the fact that most people don't understand computers.

Except we have entire sets of laws and systems to try to control and expose the risk of other investments. ICOs are the Wild West, with the added benefit that they’re totally intangible so you can’t even be stuck holding the bag.

Ah, yes, and the government knows best, right? If there's a law, then it must be safe and good for everyone!

Re: Initial Coin Offerings Horrify a Former S.E.C. Regulator

#30
post #11

What's old is new again - this is why the SEC was created if I'm not mistaken. People were losing their shirts investing in shady companies so the government stepped in to protect people from themselves. For this reason it won't be surprising at all when we start seeing some attempts to enact regulation.

Why dont we regulate everything like that. Why do we allow people to spend 2M$ on a Car or 6k$ on a bag? Why do we allow people to buy unlimited lottery tickets or gamble everything away in the casino?

Those examples have cleary less benefit for society then the dumbest investment strategy. Let people invest, sure tons if people will lose their shirt but they will learn from it and stay away. Everyone else in the society gets to Enjoy the increased liquidity in the society. Why does anyone think that its ok that we created this random gatekeeps in the society that block ordinary people from investing beciase they are to “stupid”. The accredited investors sheme is a fraud, the arbitrary number on 1m$ networth to be an accredited investor is a joke. Thats means that even a Business Prof. Can’t invest because the SEC deems him to be to stupid.

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